Andrew Bailey, the Governor of the Bank of England, shares insights on the issuance of stablecoins and warns commercial banks against such practices, highlighting the risks they pose to financial stability.
Risks Associated with Issuing Stablecoins
Andrew Bailey stated that allowing banks to issue their digital tokens could threaten financial stability and weaken government control over national currencies. He noted that introducing private stablecoins carries significant risks, including potential illicit usage and financial fragmentation.
Preference for Tokenized Deposits
Bailey proposed that banks should consider tokenizing existing deposits instead of creating stablecoins or central bank digital currencies. This could introduce digitization without disrupting the banking system and creating uncontrollable alternatives. He emphasized that the UK is not on a path to launch a digital pound, preferring a controlled approach to money digitization.
Global Caution Regarding Digital Assets
Regarding the global approach to digital assets, Bailey urged central banks to remain cautious and prioritize financial stability in developing any digital currency frameworks. He also reminded that cryptocurrencies should not be viewed as real money, expressing concerns about the risks associated with their use for traditional monetary functions.
The Bank of England’s position highlights the UK's cautious approach to digital currency. Bailey’s warnings against the issuance of stablecoins signal a preference for digital innovations within a secure and regulated financial framework.
